In the first essay, we consider a two-stage contest in which two groups compete for a group-specific public good in the second stage competition with a bias that favors or handicaps the individual winner of the first stage competition. We find that a favorable bias in the second stage competition may be a poisoned chalice. It is possible that the expected payoff of the early winner is the lowest among all players in the second stage competition. For a contest organizer that maximizes a weighted average of effort in the first and second stage competitions, the optimal bias may be favoring or handicapping the early winner. We also find that an increase in the weight of the first stage competition magnifies the optimal bias. Our study contributes to the literature by providing a new channe...[ Read more ]

In the first essay, we consider a two-stage contest in which two groups compete for a group-specific public good in the second stage competition with a bias that favors or handicaps the individual winner of the first stage competition. We find that a favorable bias in the second stage competition may be a poisoned chalice. It is possible that the expected payoff of the early winner is the lowest among all players in the second stage competition. For a contest organizer that maximizes a weighted average of effort in the first and second stage competitions, the optimal bias may be favoring or handicapping the early winner. We also find that an increase in the weight of the first stage competition magnifies the optimal bias. Our study contributes to the literature by providing a new channel to explain the variation of bias in different contests.

In the second essay, we examine how envy of neighbors affect equilibrium behavior in a lottery contest with two groups. Intuitively, individuals in a group with a higher aggregate envy should have a higher incentive to exert effort. However, we find that individuals in a group with a higher aggregate envy exert less effort when aggregate envy of both groups are larger than the prize. A group with a higher aggregate envy has a lower probability of winning when aggregate envy of both groups are larger than the prize. We also find that the aggregate effort is non-decreasing with the envy level in all equilibria. However, the aggregate effort may decrease if an increase in the envy level triggers a switch in equilibria.